<PAGE>
As Filed Pursuant to Rule 424(b)5
Registration No. 033-62166
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 27, 1993)
$100,000,000
SONAT INC.
6 5/8% NOTES DUE FEBRUARY 1, 2008
---------
Interest on the 6 5/8% Notes due February 1, 2008 (the "Notes") is payable
semiannually on February 1 and August 1 of each year, commencing August 1, 1998.
The Notes will be redeemable as a whole or in part, at the option of the Company
at any time, at a redemption price equal to the greater of (i) 100% of the
principal amount of the Notes to be redeemed and (ii) the sum of the present
values of the Remaining Scheduled Payments (as defined herein) thereon,
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined herein)
plus ten basis points, plus in each case accrued interest on the principal
amount being redeemed to the date of redemption.
The Notes do not provide for any sinking fund. The Notes will be represented
by one or more global Notes registered in the name of the nominee of The
Depository Trust Company. Beneficial interests in the global Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC and its participants. Except as described herein, Notes in definitive form
will not be issued. See "Description of Notes".
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
<S> <C> <C> <C>
Per Note 99.531% .650% 98.881%
Total $99,531,000 $650,000 $98,881,000
</TABLE>
(1) Plus accrued interest, if any, from January 30, 1998.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting".
(3) Before deducting expenses payable by the Company, estimated to be
$200,000.
------------------
The Notes are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that the Notes will be made available through the facilities of DTC on or about
January 30, 1998 against payment therefor in immediately available funds.
----------------
SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN & CO.
January 27, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
--------------
THE COMPANY
Sonat Inc. (the "Company" or "Sonat"), a Delaware corporation organized in
1973, is a diversified energy holding company. It is engaged through Sonat
Exploration Company ("Exploration") in domestic oil and natural gas exploration
and production, through Southern Natural Gas Company ("Southern") and Citrus
Corp. ("Citrus") in the interstate transmission and storage of natural gas, and
through Sonat Energy Services Company ("Energy Services") in natural gas and
electric power marketing. The Company disposed of its remaining shares of Sonat
Offshore Drilling Inc., a former subsidiary referred to in the accompanying
Prospectus, in 1995.
Exploration, which is an independent oil and gas producer, operates
primarily in Texas, Oklahoma, Louisiana, Arkansas, and the Gulf of Mexico. Oil
and gas exploration and production activities contributed approximately 47
percent of Sonat's consolidated operating income for 1996.
Southern is a major transporter of natural gas to the southeastern United
States. Its natural gas pipeline system extends primarily from gas producing
areas of Texas and Louisiana, both onshore and offshore, to markets in a
seven-state area of the Southeast. Sonat and Enron Corp., an unaffiliated
company, each owns a one-half interest in Citrus, a holding company that owns
100 percent of Florida Gas Transmission Company ("Florida Gas"). Florida Gas is
an interstate natural gas pipeline that serves electric generation, resale and
industrial markets in Florida. Natural gas transmission operations, excluding
Citrus, contributed approximately 49 percent of Sonat's consolidated operating
income for 1996. Sonat's share of Citrus' earnings is reflected in Equity in
Earnings of Unconsolidated Affiliates.
Energy Services's largest subsidiary, Sonat Marketing Company L.P.
("Marketing"), sells natural gas throughout much of the United States. Marketing
is 65-percent owned by a subsidiary of Energy Services, with the remaining
interest owned by a subsidiary of AGL Resources, Inc., an unaffiliated company
("AGL Resources"). At year-end 1996, Marketing was one of the ten largest
natural gas marketers in the United States. Energy Services owns 65 percent of
Sonat Power Marketing L.P. ("Power Marketing"), which markets electric power
throughout much of the United States. AGL Resources owns the other 35 percent of
Power Marketing. Energy Services's marketing activities contributed
approximately three percent of Sonat's consolidated operating income for 1996
(which is prior to deduction of amounts attributable to the minority interests).
PROPOSED ACQUISITION OF ZILKHA ENERGY COMPANY
Sonat entered into an Agreement and Plan of Merger, dated as of November 22,
1997 (the "Merger Agreement"), with Zilkha Energy Company ("Zilkha"), pursuant
to which a wholly-owned subsidiary of Sonat will be merged (the "Merger") into
Zilkha in a share-for-share exchange. The terms of the Merger Agreement provide
for Sonat to issue an aggregate number of shares of its common stock having a
value of approximately $1.04 billion, based upon the average closing price of
such shares on the New York Stock Exchange for a specified period prior to the
consummation of the Merger; provided that, for the purposes of such calculation,
the average closing price shall not be more than $51 per share or, unless Sonat
otherwise agrees, less than $39 per share. After giving effect to the debt and
other obligations of Zilkha that will be obligations of the surviving company in
the Merger, the total consideration will be approximately $1.3 billion. Sonat
intends to repay substantially all of such debt and obligations promptly after
the effectiveness of the Merger. See "Use of Proceeds". The Merger is expected
to be consummated on
S-2
<PAGE>
January 30, 1998, subject to the approval of the Company's shareholders at a
meeting scheduled for that date and the satisfaction of the other conditions set
forth in the Merger Agreement.
Zilkha is a privately-owned oil and gas exploration, development and
production company operating primarily offshore in the Gulf of Mexico. Zilkha
has an ownership interest in approximately 490 state and federal lease blocks,
of which approximately 340 lease blocks (covering approximately 1.4 million net
acres) are undeveloped. Zilkha has a contractual interest (with rights to drill
to earn) in approximately 200,000 additional undeveloped acres. It also has
licensed or contracted to license 3-D seismic data covering approximately 6,100
lease blocks in both shallow and deep water areas of the Gulf of Mexico.
REVOLVING CREDIT AGREEMENT
On January 26, 1998, Sonat entered into a new revolving credit agreement
with a group of banks providing for borrowings of up to $700 million from time
to time within 364 days of the effectiveness of such agreement. In connection
with this new agreement, the Company intends to terminate existing lines of
credit providing for up to $200 million of borrowings.
1997 RESULTS OF OPERATIONS
Sonat had net income of $175.9 million in 1997, or $201.3 million before
giving effect to a third quarter write-down of $25.4 million relating to its
Gulf of Mexico properties. This compares with net income of $201.2 million in
1996. For the fourth quarter of 1997, the Company's net income was $59.9
million, as compared with $67 million for the same period in 1996.
Exploration's operating income for the fourth quarter of 1997 was $41
million compared with $65 million in the fourth quarter of 1996. Natural gas and
oil production rose from 65 billion cubic feet of natural gas equivalent (Bcfe)
to 67 Bcfe. The primary reasons for lower financial results in the fourth
quarter of 1997 versus the 1996 fourth quarter were lower natural gas and oil
prices and higher operating expenses. Realized natural gas prices declined from
$2.57 per thousand cubic feet in the fourth quarter of 1996 to $2.32 in the 1997
period, while realized oil prices declined to $19.16 from $19.97 per barrel.
Fourth quarter operating income in 1997 for the Company's natural gas
transmission segment rose to $47 million from $45 million in the 1996 period,
principally due to lower general and administrative expenses. Southern's
market-area throughput rose to 172 billion cubic feet (Bcf) in the 1997 period
from 169 Bcf last year, while production-area throughput rose to 107 Bcf from 73
Bcf. Fourth quarter equity in earnings of Citrus rose from $6 million to $10
million in the 1997 period, primarily due to the restructuring of Sonat and
Enron Corp.'s marketing arrangements with Citrus Trading Company. Throughput on
the Florida Gas system rose from 104 Bcf to 107 Bcf in the 1997 period.
Fourth quarter financial results in 1997 for Energy Services were up from
1996's levels, as operating income rose to $9 million in 1997 from a loss of $1
million in the previous year. The principal reason for the increase was the
recognition of mark-to-market income from a new long-term natural gas sales
contract. Marketing's natural gas sales volumes in the 1997 quarter rose 22
percent compared to the 1996 period, and trading margins were higher. At year
end, its sales volumes reached 4.2 Bcf per day, up from 3.3 Bcf per day at the
beginning of the year. Power Marketing increased its sales volumes to 2.1
million megawatt hours in the 1997 quarter from 1.3 million megawatt hours in
the fourth quarter of 1996.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used for general
corporate purposes of the Company, including capital expenditures, working
capital and repayment of debt. If the proposed acquisition of Zilkha is
consummated (see "The Company--Proposed Acquisition of Zilkha Energy Company"),
the Company may utilize a portion of the net proceeds to repay approximately
$195 million of debt of Zilkha ($145 million of which matures on October 31,
1999 and bears interest at variable rates based on LIBOR (7.216% per annum as of
December 31, 1997) and $50 million of which matures on July 26, 2001
S-3
<PAGE>
and bears interest at variable rates based on LIBOR (9.219% per annum as of
December 31, 1997). Pending application for such purposes, the net proceeds from
the sale of the Notes will be invested in short-term investments.
RATIOS OF EARNINGS FROM CONTINUING OPERATIONS
TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- -------------------------------------
1997 1996 1995 1994
----------------- ----- ----- -----
<S> <C> <C> <C> <C>
Total Enterprise................................................ 2.5 2.9 2.7 2.2
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Total Enterprise................................................ 3.8 1.8
</TABLE>
For the purpose of calculating the ratios of earnings from continuing
operations to fixed charges, earnings is defined as the sum of net income, fixed
charges (net of interest capitalized) and taxes based on income. Fixed charges
is defined as gross interest on debt, including interest on amounts subject to
refund, amortization of debt discount and expense and one-third of rental
expense, which is considered representative of the interest factor. The ratios
also include the Company's share of the earnings and fixed charges of continuing
joint ventures.
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE TERMS OF THE NOTES OFFERED HEREBY (REFERRED
TO IN THE ACCOMPANYING PROSPECTUS AS THE "OFFERED DEBT SECURITIES") SUPPLEMENTS,
AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, INSOFAR AS SUCH DESCRIPTION
RELATES TO THE NOTES, THE DESCRIPTION OF THE OFFERED DEBT SECURITIES SET FORTH
IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
GENERAL
The Notes are to be issued under an Indenture, dated as of June 1, 1986,
between the Company and The Chase Manhattan Bank, as successor by merger to
Manufacturers Hanover Trust Company and Chemical Bank, as Trustee (the
"Trustee"), as supplemented by the First Supplemental Indenture, dated as of
June 1, 1995, between the Company and the Trustee.
The Notes will be limited to $100,000,000 aggregate principal amount and
will mature on February 1, 2008. The Notes will bear interest at the rate of
6 5/8% per annum from January 30, 1998, or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semiannually on
February 1 and August 1 of each year, commencing August 1, 1998, to the person
in whose name a Note (or any predecessor Note) is registered at the close of
business on the January 15 or July 15, as the case may be, next preceding such
Interest Payment Date.
The Notes will not be entitled to the benefit of any sinking fund.
The Notes are subject to defeasance and covenant defeasance as described
under "Description of Debt Securities -- Defeasance and Covenant Defeasance" in
the accompanying Prospectus. As more fully discussed therein, it is likely that
a defeasance of the Notes by the Company would result in a taxable event to the
holders of the Notes under current Federal income tax law.
OPTIONAL REDEMPTION
The Notes will be redeemable as a whole or in part, at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
the principal amount of the Notes to be redeemed and (ii) the sum of the present
values of the Remaining Scheduled Payments (as hereinafter defined) thereon,
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus ten basis points,
plus in either case accrued interest on the principal amount being redeemed to
the redemption date.
S-4
<PAGE>
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the arithmetic average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the arithmetic
average of the Reference Treasury Dealer Quotations for such redemption date.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the arithmetic average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer by 5:00 p.m. on the
third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Credit
Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation and J.P. Morgan Securities Inc. and their respective successors;
PROVIDED, HOWEVER, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; PROVIDED, HOWEVER, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment accrued thereon will be reduced by the
amount of interest thereon to such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Notes or portions
thereof called for redemption.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered global
notes (collectively, the "Global Notes"), which will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York (the "Depositary")
and registered in the name of the Depositary's nominee. Except as set forth
below, the Global Notes may be transferred, in whole and not in part, only to
the Depositary or another nominee of the Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Depositary was created to hold
securities of institutions that have accounts with the Depositary or its
S-5
<PAGE>
nominee ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
Depositary agrees with and represents to its participants that it will
administer its book-entry system in accordance with its rules and bylaws and
requirements of law.
Upon the issuance of the Global Notes, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Notes represented by such Global Notes to the accounts of participants. The
accounts to be credited shall be designated by the Underwriters. Ownership of
beneficial interests in the Global Notes will be limited to participants or
persons that may hold interests through participants. Ownership of interests in
the Global Notes will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) and such participants (with respect to the
owners of beneficial interest in the Global Notes through such participants).
The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer beneficial interests in the Global
Notes.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole owner and holder of the related Notes for all
purposes of such Notes and for all purposes under the Indenture. Except as set
forth below, owners of beneficial interests in the Global Notes will not be
entitled to have the Notes represented by such Global Notes registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive form and will not be considered to be the
owners or holders of any Notes under the Indenture or the Global Notes.
Accordingly, each person owning a beneficial interest in the Global Notes must
rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
the Global Notes. The Company understands that under existing industry practice,
in the event the Company requests any action of holders of Notes or an owner of
a beneficial interest in the Global Notes desires to take any action that the
Depositary, as the holder of the Global Notes, is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal (and premium, if any) and interest on Notes represented
by the Global Notes registered in the name of or held by the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner and holder of the Global Notes.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of the Global Notes, will credit immediately
participants' accounts with payment in amounts proportionate to their respective
beneficial interests in the principal amount of the Global Notes as shown on the
records of the Depositary. The Company also expects that payments by
participants to owners of beneficial interests in the Global Notes held through
such participants will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
such participants. None of the Company, the Trustee or any agent of the Company
or the Trustee will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Notes for any Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depositary and its
S-6
<PAGE>
participants or the relationship between such participants and the owners of
beneficial interests in the Global Notes owning through such participants.
Unless and until they are exchanged in whole or in part for certificated
Notes in definitive form, the Global Notes may not be transferred except as a
whole by the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
The Notes represented by the Global Notes are exchangeable for certificated
Notes in definitive registered form of like tenor as such Notes in denominations
of $1,000 and in any greater amount that is an integral multiple thereof if (i)
the Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for the Global Notes or if at any time the Depositary ceases to be
a clearing agency registered under the Exchange Act, (ii) the Company in its
discretion at any time determines not to have all of the Notes represented by
the Global Notes and notifies the Trustee thereof or (iii) an Event of Default
with respect to the Notes represented by such Global Notes has occurred and is
continuing. Any Notes that are exchangeable pursuant to the preceding sentence
are exchangeable for certificated Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, the Global Notes are not exchangeable except for a Global Note or
Global Notes of the same aggregate denominations to be registered in the name of
the Depositary or its nominee.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ---------------------------------------------------------------------------------------- --------------
<S> <C>
Salomon Brothers Inc.................................................................... $ 25,000,000
Credit Suisse First Boston Corporation.................................................. 25,000,000
Donaldson, Lufkin & Jenrette Securities Corporation..................................... 25,000,000
J.P. Morgan Securities Inc.............................................................. 25,000,000
--------------
Total............................................................................... $ 100,000,000
--------------
--------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement, and in part to certain securities dealers at such price
less a concession of 0.40% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.25% of the principal amount of the Notes to certain brokers and dealers. After
the Notes are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes, but they are under no obligation to do so and such market
making may be terminated at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
In the ordinary course of their respective businesses, each of the
Underwriters and their affiliates have provided, and may in the future provide,
investment banking and/or commercial banking services for the Company and its
affiliates.
S-7
<PAGE>
In connection with the offering of the Notes, the Underwriters may purchase
and sell the Notes in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Notes; and syndicate short
positions involve the sale by the Underwriters of a greater number of Notes than
they are required to purchase from the Company in the offering. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Notes sold in the offering for
their account may be reclaimed by the syndicate if such Notes are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes which may
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Hughes
Hubbard & Reed LLP, and for the Underwriters by Sullivan & Cromwell, New York,
New York. L. Edwin Smart, Counsel to Hughes Hubbard & Reed LLP, has retired as a
director of the Company.
EXPERTS
The consolidated financial statements of Sonat Inc. and subsidiaries
appearing in Sonat's Annual Report (Form 10-K) for the year ended December 31,
1996 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated in the Prospectus by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference its Annual Report on Form 10-K
for the year ended December 31, 1996, its Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1997 and its Current Reports
on Form 8-K dated September 25 and November 22, 1997 and January 22, 1998 filed
under the Exchange Act with the Securities and Exchange Commission (the
"Commission").
Reference is made to the information under "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus. All documents filed
under the Exchange Act with the Commission prior to January 1, 1997 and
incorporated by reference in the Prospectus have been superseded by the
above-listed documents and shall not be deemed to constitute a part of the
Prospectus or this Prospectus Supplement.
S-8
<PAGE>
SONAT INC.
DEBT SECURITIES
----------------
Sonat Inc. (the "Company") may offer from time to time up to $500,000,000
aggregate principal amount or the equivalent thereof in one or more currency
units of its debt securities (the "Debt Securities") in one or more series, at
prices and on terms to be determined at the time of sale. As used herein, Debt
Securities shall include securities denominated in United States dollars or, at
the option of the Company if so specified in the applicable Prospectus
Supplement, in any other currency or in composite currencies or in amounts
determined by reference to an index. The specific designation, aggregate
principal amount, authorized denominations, purchase price, maturity, rate and
time of payment of any interest, any redemption terms or other specific terms
and any listing on a securities exchange of the Debt Securities in respect of
which this Prospectus is being delivered ("Offered Debt Securities") are set
forth in the accompanying prospectus supplement ("Prospectus Supplement"),
together with the terms of offering of the Offered Debt Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Company may sell Debt Securities to or through dealers, acting as
principals for their own accounts ("underwriters") or as agents ("agents"), or
directly to other purchasers. See "Plan of Distribution." The Prospectus
Supplement sets forth the names of such underwriters or agents and any
applicable commissions or discounts. The net proceeds to the Company from such
sale are also set forth in the Prospectus Supplement.
The date of this Prospectus is July 27, 1993.
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER OR AGENT. NEITHER
THE DELIVERY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT, NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy or information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy or
information statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices in New York (Seven World Trade Center, New York, NY 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661). Copies of such material can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain of the Company's securities
are listed on the New York Stock Exchange, Inc. and the Pacific Stock Exchange.
Reports, proxy or information statements and other information can be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
NY 10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco, CA
94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents filed
under the Exchange Act with the Commission:
(a) its Annual Report on Form 10-K for the year ended December 31, 1992;
(b) its Quarterly Report on Form 10-Q for the quarter ended March 31,
1993; and
(c) its Report on Form 8-K dated June 4, 1993, as amended by its Report
on Form 8-K/A No. 1 filed July 16, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in the accompanying Prospectus
Supplement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference, other than exhibits to
such documents. Such requests should be directed to Secretary, Sonat Inc., P.O.
Box 2563, Birmingham, AL 35202 (telephone: (205) 325-7104).
2
<PAGE>
THE COMPANY
The Company, a Delaware corporation organized in 1973, is a diversified
energy holding company which, through its subsidiaries, operates in two business
segments: Natural Gas Transmission and Marketing and Oil and Gas Exploration and
Production.
Sonat participates in the natural gas transmission and marketing business
through Southern Natural Gas Company ("Southern"), Citrus Corp. and Sonat Energy
Services Company. Southern, an interstate natural gas pipeline company, is a
major transporter and supplier of natural gas to the southeastern United States.
The 8,800-mile natural gas transmission system of Southern and its subsidiaries,
which has a certificated daily delivery capacity of approximately 2.4 billion
cubic feet, extends primarily from gas producing areas of Texas and Louisiana,
both onshore and offshore, to markets in a seven-state area of the southeast.
Citrus Corp., a holding company 50% owned by Sonat, owns 100% of Florida Gas
Transmission Company ("Florida Gas"), an interstate natural gas pipeline company
that is the primary supplier of natural gas in the State of Florida and the sole
pipeline supplier to peninsular Florida. Florida Gas owns a 4,700-mile natural
gas transmission system that extends from south Texas to a point near Miami,
Florida, and has a certificated daily delivery capacity of 925 million cubic
feet. Sonat Energy Services Company is active in the acquisition,
transportation, and marketing of natural gas, primarily in the southeastern
United States. Sonat's natural gas pipeline businesses are subject to
significant regulation and competition.
Sonat Exploration Company ("Exploration") develops and produces oil and
natural gas, primarily in Texas, Louisiana, Arkansas, Oklahoma, Alabama and the
Gulf of Mexico. In 1988, Exploration began a strategy to acquire domestic gas
properties with significant development potential. At December 31, 1992,
Exploration's proved reserves totalled approximately 1.1 trillion cubic feet of
natural gas equivalent.
In addition, the Company owns 40% of Sonat Offshore Drilling Inc.
("Offshore"), which prior to June 1993 had been a wholly owned subsidiary of the
Company. In June 1993, Offshore made an initial public offering of its common
stock and the Company sold additional shares of Offshore common stock in such
offering. Offshore is engaged in contract drilling of oil and gas wells in
offshore areas throughout the world.
The Company's principal executive offices are located at 1900 Fifth Avenue
North, AmSouth-Sonat Tower, Birmingham, AL 35203 and its principal mailing
address is P. O. Box 2563, Birmingham, AL 35202. The Company's telephone number
at its principal executive offices is (205) 325-3800.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds
from the sale of the Offered Debt Securities will be used for general corporate
purposes, which may include refinancing of indebtedness, working capital
increases, capital expenditures, possible future acquisitions and redemption of
securities. Depending upon market conditions, the Company may obtain funds to
finance these expenditures from bank borrowings or the sale of commercial paper
and later repay such borrowings with the proceeds from the sale of Debt
Securities, or the Company may invest all or part of such proceeds in short-term
money market instruments pending utilization of such proceeds. The Company may
also engage in additional public or private financings of a character and amount
to be determined.
CAPITAL EXPENDITURE BUDGET
The Company's consolidated capital expenditures (including joint venture
expenditures) for 1993 are expected to aggregate approximately $400 million,
which will include oil and gas acquisition, exploration and development,
pipeline expansion and other projects.
3
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RATIOS OF EARNINGS FROM CONTINUING OPERATIONS
TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31, YEARS ENDED DECEMBER 31,
------------ ----------------------------
1993 1992 1991 1990 1989 1988
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Enterprise......... 3.4 1.8 1.5 1.7 2.0 1.6
</TABLE>
For the purpose of calculating the ratios of earnings from continuing
operations to fixed charges, earnings is defined as the sum of net income, fixed
charges (net of interest capitalized) and taxes based on income. Fixed charges
is defined as gross interest on debt, including interest on amounts subject to
refund, amortization of debt discount and expense and one-third of rental
expense, which is considered representative of the interest factor. The ratios
also include the Company's share of the earnings and fixed charges of continuing
joint ventures.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Offered Debt Securities. The
particular terms of the Offered Debt Securities and the extent, if any, to which
such general provisions may apply to the Offered Debt Securities are described
in the Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities are to be issued under an indenture, dated as of June 1,
1986 (the "Indenture"), between the Company and Chemical Bank, as successor by
merger to Manufacturers Hanover Trust Company, Trustee (the "Trustee"). The
following statements are summaries of certain provisions of the Indenture (which
is incorporated by reference as an exhibit to the Registration Statement of
which this Prospectus is a part) and are subject to the detailed provisions of
the Indenture. Reference is hereby made to the Indenture for a full description
of such provisions, including definitions of certain terms used, and for other
information with respect to the Debt Securities. Numerical references below are
to Sections of the Indenture.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities of any particular series of Offered Debt Securities which can be
issued thereunder and provides that Debt Securities may be issued thereunder
from time to time in one or more series. Reference is made to the Prospectus
Supplement for the following terms of the Offered Debt Securities: (i) the
designation, aggregate principal amount and authorized denominations of the
Offered Debt Securities; (ii) the percentage of the principal amount at which
the Offered Debt Securities will be issued; (iii) the date or dates on which the
Offered Debt Securities will mature; (iv) the rate or rates (which may be fixed
or variable), or the method by which such rate or rates shall be determined, at
which the Offered Debt Securities will bear interest, if any, the date or dates
from which such interest shall accrue, or the method by which such date or dates
shall be determined, the dates on which such interest shall be payable and the
regular record dates with respect thereto; (v) the dates, if any, on which and
the price or prices at which the Offered Debt Securities will, pursuant to any
mandatory sinking fund provisions, or may, pursuant to any optional sinking fund
provisions, be redeemed by the Company, and the other detailed terms and
provisions of such sinking funds; (vi) the date, if any, after which and the
price or prices at which the Offered Debt Securities may, pursuant to any
optional redemption provisions, be redeemed at the option of the Company or of
the Holders thereof and the other detailed terms and provisions of such optional
redemptions; (vii) any additional or substituted restrictive covenants included
for the benefit of the Offered Debt Securities or any provision that any
restrictive covenant in the Indenture shall not apply with respect to the
Offered Debt Securities; (viii) any additional Events of Default provided with
respect to the Offered Debt Securities; (ix) the currency or currencies of
payment of principal of and premium, if any, and interest on the Offered Debt
Securities; (x) any index used to determine the amount of payments of principal
of and premium, if any, and interest on the Offered Debt Securities; (xi) the
application of defeasance or covenant defeasance provisions to the Offered Debt
Securities; and (xii) any other terms (which terms
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<PAGE>
shall not be inconsistent with the provisions of the Indenture). (Section 3.01.)
However, with respect to Offered Debt Securities sold through agents, the
maturities and interest rates of such Offered Debt Securities may be fixed by
the Company from time to time, in which case such maturities and rates are not
set forth in the Prospectus Supplement relating thereto but instead will be made
available through such agents.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal, premium, if any, and interest, if any, will be payable, and the
Offered Debt Securities will be exchangeable and transfers thereof will be
registrable, at the principal corporate trust office of the Trustee in New York
City, except that payment of interest, if any, on the Offered Debt Securities
may be made at the option of the Company by check mailed to the address of the
person entitled thereto as it appears in the register for the Offered Debt
Securities. (Sections 3.05 and 6.02.)
The Debt Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued only in fully registered form without
coupons in denominations of $1,000 or integral multiples thereof. No service
charge will be made for any transfer or exchange of such Offered Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Sections 3.02
and 3.05.)
Certain of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below the stated
principal amount. (Section 1.01.) Federal income tax consequences and other
special considerations applicable to any such discounted Debt Securities will be
described in the Prospectus Supplement relating thereto.
LIMITATION ON LIENS
Unless otherwise indicated in the Prospectus Supplement relating to the
Offered Debt Securities, the Company may not grant a Lien (as defined below) to
secure any indebtedness for borrowed money, or any guarantee or indemnity in
respect thereof, upon, or with respect to, any capital stock of any Restricted
Subsidiary (as defined below) owned directly or indirectly by the Company, or
upon, or with respect to, any capital stock of any other Subsidiary owned
directly by the Company, in each case unless the Company shall, simultaneously
therewith or prior thereto, take any and all action necessary to procure that
all amounts payable by it under the Offered Debt Securities are secured equally
and ratably with (or prior to) such indebtedness (or such guarantee or indemnity
in respect thereof, as the case may be); PROVIDED that the foregoing does not
prevent the Company from selling, conveying, distributing (through a dividend or
otherwise) or transferring any or all of the capital stock of any Restricted
Subsidiary or any other Subsidiary. (Section 6.04.)
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may waive compliance by the Company with the covenant
contained in Section 6.04 of the Indenture with respect to such series of Debt
Securities. (Section 6.08.)
The term "Restricted Subsidiary" means Southern, Offshore and Exploration,
each of which is a Delaware corporation and was a subsidiary of the Company as
of the date of the Indenture, and any Subsidiary of the Company which is a
successor of any of such corporations to which all or substantially all of the
properties and assets of any of such corporations have been transferred.
(Section 1.01.)
The term "Subsidiary" means any corporation of which more than 50% of the
outstanding stock ordinarily entitled to vote shall at the time be owned by the
Company or by the Company in conjunction with one or more Subsidiaries or by one
or more Subsidiaries. (Section 1.01.)
The term "Lien" means any mortgage, pledge, lien, encumbrance or other
security interest which secures the payment or performance of an obligation.
(Section 1.01.)
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<PAGE>
EVENTS OF DEFAULT
Unless otherwise indicated in the Prospectus Supplement, the following will
be Events of Default under the Indenture with respect to any series of Debt
Securities: (a) default in the payment of any installment of interest on any
Debt Securities of that series when due, continued for 30 days; (b) default in
the payment of principal or premium, if any, on any Debt Securities of that
series when due; (c) default in the payment or satisfaction of any sinking fund
obligation with respect to Debt Securities of that series when due, continued
for 30 days; (d) failure to observe or perform any other covenant (other than a
covenant included in the Indenture for the benefit of any series of Debt
Securities other than that series) continued for 90 days after notice by the
Trustee or by the Holders of 25% in principal amount of the outstanding Debt
Securities of such series; (e)certain events of bankruptcy, insolvency or
reorganization with respect to the Company; or (f) any other Event of Default
provided with respect to Debt Securities of that series. A default under other
indebtedness of the Company will not be an Event of Default under the Indenture,
and an Event of Default with respect to a particular series of Debt Securities
issued under the Indenture will not necessarily be an Event of Default with
respect to any other series of Debt Securities issued thereunder. In case an
Event of Default shall occur and be continuing with respect to any series of
Debt Securities, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Debt Securities then outstanding of the series may
declare the principal (or, if the Debt Securities of such series are discounted
Debt Securities, such portion of the principal as may be specified in the terms
of such series) of such series and the interest accrued thereon to be due and
payable. (Section 8.01.)
The Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of any series may waive any default resulting in acceleration of
maturity of the Debt Securities of such series but only if all defaults with
respect to such series have been remedied and all payments due (other than by
acceleration) with respect to such series have been made. (Section 8.01.) Prior
to acceleration of maturity of a particular series of Debt Securities, the
Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of such series may on behalf of the Holders of all Debt Securities of
such series waive any past default under the Indenture and its consequences,
except a default in the payment of interest or premium, if any, on or the
principal of any of the Debt Securities of such series. (Section 8.06.)
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are discounted Debt Securities for the particular
provisions relating to acceleration of the maturity of a portion of the
principal amount of such discounted Debt Securities upon the occurrence of an
Event of Default and the continuation thereof.
The Indenture requires the Company to file annually with the Trustee a
certificate as to the absence of default and as to compliance with the terms of
the Indenture. (Section 6.07.) The Indenture provides that the Trustee may
withhold notice to the Holders of the Debt Securities of any default (except in
payment of principal, premium, if any, or interest or in payment of any sinking
fund obligation) if it considers it in the interest of the Holders of the Debt
Securities to do so. (Section 8.07.)
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Indenture
provides that the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of the
Holders of the Debt Securities unless such Holders shall have offered to the
Trustee reasonable indemnity. (Sections 8.04, 9.01 and 9.02.) Subject to such
provisions for indemnification and certain other rights of the Trustee, the
Indenture provides that the Holders of a majority in principal amount of the
outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series. (Sections 8.06 and 9.02.)
MODIFICATION OF INDENTURE
Except as to certain modifications and amendments not adverse to Holders of
outstanding Debt Securities, modifications and amendments of the Indenture may
be made by the Company and the
6
<PAGE>
Trustee only with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series issued under
the Indenture which is affected by the modification or amendment, provided that
no such modification or amendment may: (i) change the stated maturity date of
the principal of, or any installment of interest on, any Debt Security, reduce
the principal amount of, or the interest (or premium, if any) on, any Debt
Security (including in the case of a discounted Debt Security the amount payable
upon acceleration of the maturity thereof or provable in bankruptcy), change the
currency of payment of principal of or interest (or premium, if any) on any Debt
Security, or impair the right to institute suit for the enforcement of any
payment of the principal of, and premium, if any, and interest on any Debt
Security, without the consent of the Holder of such Debt Security; or (ii)
reduce the aforesaid percentage of Debt Securities the Holders of which are
required to consent to modify or amend the Indenture without the consent of the
Holders of all Securities affected thereby. (Sections 8.04, 12.01 and 12.02.)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if and to the extent that the provisions of
Article Fifteen are made applicable to the Debt Securities of any series and
certain conditions are met, the Company may elect either or both (A) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Securities under Section
6.04 of the Indenture (being the restrictions described under "Limitation on
Liens") and any omission to comply with such obligations will not constitute an
Event of Default with respect to Debt Securities of such series ("covenant
defeasance"), upon the irrevocable deposit with the Trustee (or other qualifying
trustee), in trust for such purpose, of money, or Eligible Obligations (as
defined) or U.S. Government Obligations (as defined) which through the payment
of principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of (and premium, if any) and interest
on such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor. (Article Fifteen.)
Under current federal income tax law, in the event the Company effects
defeasance it is likely that any such deposit in trust of money, Eligible
Obligations or U.S. Government Obligations and discharge of the Indenture with
respect to any series of Debt Securities will be treated as a taxable exchange
of such series of Debt Securities for interests in such trust. In that event, a
Holder of the Debt Securities will recognize gain or loss equal to the
difference between the Holder's cost or other tax basis for the Debt Securities
and the value of the Holder's interest in such trust, and thereafter will be
required to include in income a share of the income, gain and loss of the trust.
Purchasers of the Debt Securities should consult their own tax advisers with
respect to the tax consequences to them of such deposit and discharge, including
the applicability and effect of tax laws other than the federal income tax law.
In the event the Company effects covenant defeasance with respect to Debt
Securities of any series and the Debt Securities of such series are declared due
and payable because of the occurrence of any Event of Default (other than the
Event of Default described in clause (d) under "Events of Default" with respect
to Section 6.04 of the Indenture), the amount of money, Eligible Obligations and
U.S. Government Obligations on deposit with the Trustee will be sufficient to
pay amounts due on the Debt Securities of such series at the time of their
stated maturity but may not be sufficient to pay amounts due on the Debt
Securities of such series at the time of the acceleration resulting from such
Event of Default. However, the Company will remain liable for such payments.
The term "Eligible Obligations" means interest bearing obligations as a
result of the deposit of which the Debt Securities are rated in the highest
generic long-term debt rating category assigned to legally defeased debt by one
or more nationally recognized rating agencies. (Section 1.01.)
The term "U.S. Government Obligations" means (i) direct obligations of, or
obligations the principal of and interest on which are fully guaranteed by, the
United States of America (provided that such
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<PAGE>
obligations are not callable or redeemable at the option of the issuer thereof),
or (ii) depository receipts issued by a bank or trust company as custodian with
respect to any U.S. Government Obligation described in clause (i) or a specific
payment of interest on or principal of any such U.S. Government Obligations held
by such custodian for the account of the holder of a depository receipt,
PROVIDED that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligations or the specific payment of interest on or principal of
the U.S. Government Obligations evidenced by such depository receipt, or (iii)
securities that are backed by any U.S. Government Obligation described in clause
(i) as collateral under an arrangement by which the principal and interest
payments on the collateral generally flow directly through to the holder of the
Security. (Section 1.01.)
The Prospectus Supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance with respect to the Debt
Securities of a particular series.
CONSOLIDATION, MERGER, SALE, RESTRUCTURING OR HIGHLY LEVERAGED TRANSACTION
Nothing in the Indenture prohibits the consolidation or merger of the
Company with or into any other corporation, or the sale or conveyance of
substantially all of the Company's properties to any other person (including any
Subsidiary), without the consent of the Holders of the Debt Securities, provided
that (i) the successor assumes all obligations of the Company under the
Indenture and the Debt Securities, (ii) immediately after giving effect to such
transaction, no Event of Default (and no event which, after notice or lapse of
time or both, would constitute an Event of Default) shall have occurred and be
continuing and (iii) certain other conditions are met. (Article Thirteen.) Other
than the covenants and provisions in the Indenture described above, there are no
covenants or provisions in the Indenture which would provide the Holders of the
Debt Securities with any special protection or rights in the event the Company
is involved in a change of control, highly leveraged transaction,
reorganization, restructuring or merger, or similar transaction involving the
Company that may adversely affect holders of the Debt Securities.
THE TRUSTEE
Chemical Bank, as successor by merger to Manufacturers Hanover Trust
Company, is trustee for certain of the Company's subsidiaries under other
indentures, is a depositary of the Company, has from time to time made loans to
the Company and certain of its subsidiaries and has performed other services for
the Company and its subsidiaries in the normal course of its business.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or agents,
or directly to other purchasers. Underwriters may sell Offered Debt Securities
directly to other purchasers or through other dealers, who may receive
compensation from the underwriters in the form of discounts, concessions or
commissions. The Prospectus Supplement with respect to the Offered Debt
Securities sets forth the terms of the offering, including the name or names of
any underwriters or agents, any discounts, commissions and other items
constituting compensation from the Company, and any discounts, concessions or
commissions allowed or reallowed or paid by any underwriters to other dealers.
Underwriters, dealers and agents participating in the distribution of the
Offered Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them and any profit realized by them on the resale
thereof may be deemed to be underwriting discounts and commissions, under the
Securities Act of 1933.
The Debt Securities may be sold from time to time in one or more
transactions at a fixed price or prices, which may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. The Company also may, from time to time, authorize dealers,
acting as the Company's agents, to solicit offers to purchase the Offered Debt
Securities upon the terms and conditions set forth in any Prospectus Supplement.
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If so indicated in the Prospectus Supplement, the Company may authorize
underwriters or agents to solicit offers by specified institutions to purchase
Offered Debt Securities from the Company at the offering price set forth in the
Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Such contracts will be
subject only to those conditions set forth in the Prospectus Supplement and any
commission payable for solicitation of such contracts is set forth in the
Prospectus Supplement.
Underwriters and agents may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution by
the Company to payments they may be required to make in respect thereof. Such
underwriters and agents may be customers of, engage in transactions with, or
perform services for the Company and its subsidiaries in the ordinary course of
business.
LEGAL OPINIONS
The legality of the Debt Securities will be passed upon for the Company by
Hughes Hubbard & Reed, One Battery Park Plaza, New York, NY 10004. L. Edwin
Smart, a director of the Company, serves as counsel to the law firm of Hughes
Hubbard & Reed. Unless otherwise indicated in the Prospectus Supplement related
thereto, if the Offered Debt Securities are being distributed in an underwritten
offering, the validity of the Offered Debt Securities will be passed on for the
Underwriters by Sullivan & Cromwell, 125 Broad Street, New York, NY 10004.
EXPERTS
The consolidated financial statements and schedules of Sonat Inc. and
Subsidiaries appearing in the Sonat Inc. Annual Report (Form 10-K) for the year
ended December 31, 1992, have been audited by Ernst & Young, independent
auditors, as set forth in their report included therein and incorporated herein
by reference. Such consolidated financial statements and financial statement
schedules are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
9
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NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
The Company.................................... S-2
Use of Proceeds................................ S-3
Ratios of Earnings from Continuing Operations
to Fixed Charges.............................. S-4
Description of Notes........................... S-4
Underwriting................................... S-7
Validity of the Notes.......................... S-8
Experts........................................ S-8
Incorporation of Certain Documents by
Reference..................................... S-8
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company.................................... 3
Use of Proceeds................................ 3
Capital Expenditure Budget..................... 3
Ratios of Earnings from Continuing Operations
to Fixed Charges.............................. 4
Description of Debt Securities................. 4
Plan of Distribution........................... 8
Legal Opinions................................. 9
Experts........................................ 9
</TABLE>
$100,000,000
SONAT INC.
6 5/8% NOTES
DUE FEBRUARY 1, 2008
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P R O S P E C T U S S U P P L E M E N T
JANUARY 27, 1998
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SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN & CO.
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